For our March Webinar, Mark Stiving, PhD, Chief Pricing Educator at Impact Pricing, explored differences between perceived and actual B2B value, ways buyers weigh inherent value alongside value relative to competing alternatives, and offered actionable advice for commercial teams seeking to build value into their solutions and sharpen their value message. After the session, he answered questions from the webinar audience. In this blog, we share his live answers.
How can B2B teams reinforce their differentiation early in the customer journey (i.e. before detailed financial discussions take place)?
That’s actually a really interesting question. Let me start by talking about the difference between B2B and B2C sales. In B2B, if you’re selling something of value, it will come down to a business case. It will come down to whether I am helping my company make more money. In B2C, that doesn’t exist, right? I bought a new shirt and it’s not going to make me more money. No one can do the calculation of “how much more money is this shirt going to make me?” So, we buy things ourselves based on feelings and emotions. It makes my life easier; it makes me feel better.
This is true inside a company that you’re selling to. So, when you think about selling B2B and you’re selling a high-value item, we absolutely have to get to the financials before we get the sale closed, but we have to get the attention of each of the individual buyer personas or buyers that are involved in the sale. And to do that, we’re stealing tactics from B2C people. We’re saying, “hey, this is going to make your job easier, it’s going to help you personally, and those are the ways we’re going to make sure of that.” We’re going to be able to get their attention early in the sales cycle so that we can get to the business case.
How do you categorize whether the customer is making a “will I” vs “which one” decision in a scenario where the job to be done is being handled in a completely different way?
What we’re always trying to do is understand what it is that our buyers are thinking, not necessarily how we want to categorize it. Going back to the CRM example – if someone is using Excel today to manage all this data, and they’re saying, “This is kind of working, but not as well as it should. Let me look at a different alternative.” They’re always comparing the next thing to what they have today. That’s the “will I?” decision.
When I think of “will I” decisions, something besides price is driving that decision, but as soon as they ask, “Am I going to go with HubSpot or am I going to go with Salesforce?” Suddenly price is really important to them. They’re looking at the price of each one and trying to compare the two together. So when you think about what’s the inherent value in terms of a “will I” decision for a CRM relative to Excel, what we’re asking is “What are the problems you’re going to solve with your CRM that they can’t solve with Excel?”
How do your buyer journeys intersect with the quantitative research on willingness to pay (choice, max diff, etc.)?
I’m just recently coming to this conclusion – these statistical techniques aren’t that valuable in the B2B world. In B2C they’re crucial because, again, I can’t figure out what’s the value of a shirt or what the value of a refrigerator is to a homeowner. I just don’t know those answers. I don’t know how to calculate those answers.
But on the other hand, if I’ve got a direct salesperson who’s talking to a customer, what’s so much more important than any statistical analysis is what the specific problems are that I’m solving for that customer and how much value are we delivering to that customer. If we can do that enough times, we’ve got a really good feel for what our pricing should be, and how we communicate value. And so for us to do statistics on that doesn’t feel as important or as relevant to the decisions that we have to make.
Now I want to give you one more example. Think about someone who’s selling the value of the product for a second. You’re going to buy a product and I come to ask you the question, “How much are you willing to pay for this? And let’s pretend that you’re going to answer the question honestly to the best of your ability. Do you understand all the value I can deliver before I’ve used all of my value selling communication techniques? The answer is no. And so whatever number you give me isn’t truly your willingness to pay because I haven’t communicated the value to you yet. So when I start thinking that way, I start thinking about the statistical analysis for B2B direct sales situations, and it makes very little sense to me.
Why do so many SaaS companies not track actual value realized to the point of putting their fee at risk? Some seem able to communicate what the possible value could be, but it seems like they are missing out by just using value as a marketing strategy.
I’m going to reframe the question for a second into “What are we charging for?” One of the decisions that we make in the SaaS world all the time is the pricing metric. What do you charge for? So Google charges per click, LinkedIn charges per InMail, and Dropbox charges per terabyte of storage. And so what do you charge for? And when you think about fee-at-risk type contracts, what you’re saying is, “I’m charging you for a solution to the problem. I’m not charging you for my time, I’m not charging you for my effort, I’m charging you for this outcome.”
Now when you can price relative to outcomes, it’s probably the single best way to do pricing metrics. But it’s hard because there’s always this debate and we see this inside companies. As a pricing person, I moved the ASPs up in my company and I go to the CEO and I say, “Hey, guess what? We moved ASPs up, didn’t the pricing team do great?” And sales goes, “What are you talking about? We did a much better job at selling value. We had that big training program and negotiations course,” and marketing goes, “What are you saying? We did this beautiful marketing campaign and those higher ASPs are because of what we did.”
Most of the time it’s really hard to get people to commit to measuring outcomes the same way. And that’s why we rarely see outcome-driven pricing in SaaS. Probably my favorite outcome-driven pricing that you see are companies like PayPal, right? We’re going to take 2% of the revenue and can I just tell you that I can’t wait for the day that I pay PayPal a million dollars? Right? That’ll make me happy when I do that.
Knowing whether a customer is a price or value buyer is key. If they are solely a price buyer, they may never appreciate the incremental value to justify spending more. What are your thoughts?
If we’re talking about a direct salesperson walking out and talking to a specific buyer, one of the things we have to understand is what are the problems they’re trying to solve. So what matters to them? And once we understand that, then we can sell the value. For someone to say, “Look, I’m not buying value,” what I would interpret that as saying is they don’t care about this problem. They would rather just solve the basic problem and they don’t want to solve any problems on top of that. And so maybe that’s not our customer, or maybe we’ve packaged our products in a good, better, best format so that we’ve built the good products specifically for this price buyer, and yet people who truly want to buy value, they’re going to buy our better or our best products.
